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The Best of Times, the Worst of Times
American agriculture, like the rest of the US economy, had a schizophrenic year; there was good news and bad news. The really bad news, however, is that 2004?s bad news easily outdistanced the year?s good news.
The good news was record US ag exports and record US net farm income. Both were trumpeted by US Secretary of Agriculture Ann Veneman throughout the fall as she floated through farm country like wind-blown pollen promoting President George Bush?s reelection.
But like Veneman herself, whom Bush dumped within days of his Nov. 2 victory, the trade and income news was short-lived.
Take 2004?s record $62.5 billion in ag exports. By itself, the number is impressive: this year?s ag exports were $6.1 billion more than last year.
Toss in a comparison, however, and the stratospheric number begins to sag. For example, while US ag exports were up 10.8%, US ag imports were up an astonishing 15% to $52.7 billion. That number, too, is a record.
Moreover, while ag exports will fall from their lofty level in 2005, ag imports will continue to climb. On Nov. 22, USDA forecast US food imports and exports will be in balance next year; both are pegged at $56 billion.
If accurate, a dubious assumption given the flood of imports now swamping America, 2005 will be the first year since the late-1950s that US agriculture will not post an ag trade surplus.
Actually, notes the US Commerce Dept., which keeps more detailed trade records than USDA, the nation lost its ag trade surplus in 2002 and has been red-faced--and in red--in the food trade for years.
The farm income picture is similarly mixed. This year?s estimated $73.7 billion net farm income is easily the biggest in history, an incredible $14.5 billion more than just a year ago.
Twenty-one percent of that total figure, $15.7 billion, came through government payments to farmers. Another 9%, or $6.7 billion, came from inventory--grain, livestock and other commodities--carried over from 2003 and sold in 2004.
Both numbers inflate actual income farmers earned from the market. The inventory number is especially fat-laden: it is three to four times the average inventory carried year-to-year by farmers and will likely fall by $4 to $5 billion in 2005.
More importantly, given today?s weak commodity prices the overall impact of government payments in 2005 are certain to grow. Both facts confirm--again--the old axiom that one year?s data does not a trend make.
As noted, the year?s bad news was quite bad. In early 2004, cattle ranchers convinced an Alabama federal court jury that Tyson Foods, through it red meat subsidiary IBP, had for years interfered in the marketplace in violation of the Packers & Stockyards Act. The jury awarded the 30,000 class action plaintiffs about $1.2 billion.
That victory--proof that meatpackers systematically drove cash cattle prices down through market power--was snatched from the ranchers when, two months later, the presiding judged tossed out the jury decision on grounds they misunderstood the case.
An appeal on the judge?s action was heard Dec. 17 in Montgomery, AL, and news reports suggest that the confusion the trial judge interjected into the case--he viewed it as an antitrust case even though the ranchers clearly filed, then proved, a Packers & Stockyards violation--still reigns.
The three judge appeals panel noted from the bench that the briefs submitted by the opposing attorneys were ?confusing:? Was the suit antitrust or P&S? The question is a another bad sign that market bruising activity by Big Ag is tough to prove and will continue to nick American farmers and ranchers.
Last December?s BSE earthquake still shakes domestic and foreign markets, also. While cattle producers enjoyed fat profits this year--due to short domestic supplies and import bans that kept foreign beef out of American meat cases--USDA is poised to reopen the Canadian border early next year, probably by March.
Just this week, however, a Japanese newspaper, the Nihon Keizai Shimbum, reported that toughened meat inspection rules imposed by Veneman last December are not being followed in many US slaughter plants.
According to union officials representing the meat inspectors, many BSE-susceptible cattle parts--like spinal tissue and brains--are finding their way into the US meat supply despite USDA?s promised crackdown.
USDA quickly denied the report Dec. 21, saying the inspector?s union had not reported the violations to it. Evidently, packing house violations are not violations until USDA knows of them--food for thought the next time you bite into a Big Mac.
That same attitude was shown by President Bush in a Monday news conference, only his 17th since taking office in Jan. 2001. When asked about specifics of his premier legislative item, Social Security reform, the President said he wasn?t going to discuss the plan?s details publicly.
The jibe wasn?t just the usual Bush secrecy; a better bet is that the President has no overall strategy to alter the most successful government program until--and here?s the reason for the press conference--he can convince the American public of a crisis.
So far he has failed. Only 38% of America believes in Bush?s plan to privatize some of the program. More than 50% oppose the idea.
The simple reason may be that Social Security, arguably most farmers? and ranchers? principle retirement program, is not in crisis.
Indeed, the program will be self-sustaining through 2018. After that, money coming in will not cover money going out. According to current analyses, though, that shortfall will total $3.7 trillion over the next 75 years.
Bush?s core plan, however, is estimated to cost upwards to $2 trillion over the next 50 years. And, more importantly, he has already stated that he will not raise taxes to cover that cost. In short, he hopes to convince Congress to borrow the money.
At the same news conference--and with a straight face--Bush then called on Congress to cut federal spending. The deficit, not Social Security, say many in Congress, is the nation?s biggest domestic elephant.
Saxby Chambliss, R-GA, whom Senate Majority Leader Bill Frist tapped as incoming Senate Ag Committee Chairman this week, named the deficit as the committee?s biggest challenge as Congress heads into hearings for a 2007 Farm Bill.
Like Bush, though, Chambliss works both sides of the deficit street with skill and ease. As a member of the House Ag Committee in 1996, Chambliss initially voted against that year?s Freedom to Farm policy until he and other Southerners were able to squeeze $3 billion more from taxpayers to support peanut, cotton and tobacco farmers.
Other issues hanging fire for the coming year are Country of Origin Labeling, a bruising Senate vote on the Central American Free Trade Agreement, World Trade Organization talks on global ag trade, continued cutbacks on USDA soil and water conservation funds and the President?s continued push for more deficit-boosting tax cuts.
The bottom line is that if you thought 2004 was mixed bag for US farmers and ranchers, wait till you see 2005. And think bottom.
Food Aid, CCC Stocks Down; Way Down
In yet another sign that federal deficits are forcing cutbacks in key safety net programs both in the US and abroad, a Dec. 22 New York Times story outlines how the White House has cut up to $100 million from global food aid programs in just the last two months.
The cutbacks, notes the Times quoting recently published data, ?come at a time when the number of hungry in the world is rising for the first time in years and all food programs are being stretched.?
Moreover, wrote the Times? Elizabeth Becker, ?Officials of several charities, some Republican members of Congress and some administration officials say the food aid budget for the fiscal year that began Oct. 1 was at least $600 million less than what charities and aid agencies would need to carry out current programs.?
Merry Christmas to the world?s tired, poor and hungry, eh?
As some experts have pointed out, the FY 2005 federal budget allots nearly $450 billion for the Pentagon but only $15 billion for foreign food aid--and most of it for emergency hunger relief rather than long-term farm and food development in nations that suffer chronic food shortages.
The experts, while not urging cutbacks in defense, suggest Congress and the White House need to re-emphasize foreign aid, especially development aid rather than just emergency aid, as the more effective long-term deterrent to terrorism. They hope to get that discussion on the Congressional radar in 2005.
Meanwhile, back home, US food stocks are nearing all-time lows, also, according to USDA Commodity Credit Corp. That fact was brought to light in a Dec. 15 letter to Kansas newspapers by Tom Giessel, former vice president of the Kansas Farmers Union.
In an email conversation, Giessel notes the seeds for the letter were planted when marveling at ?urban centers from an airplane, amazed that they always have access to any and all food within minutes of their homes.?
But, he pondered, ?Just how fragile is this situation?? The question led him to examine USDA?s CCC stocks, the buffer our government maintains to even out market volatility and food shortages. What he found, and how he views it, is below.
December 15, 2004
Dear Editor,
My jaw nearly hit the floor when I examined a copy of the November 1, 2004 inventory list of U.S.D.A. Commodity Credit Corporation (CCC) owned stocks. There is no doubt the levels are at an all-time low. I find it difficult to imagine in a time of war, we would allow ourselves this vulnerability.
The current CCC inventory shows corn: 100,000 bushels; barley: 100,000 bushels; oats: 100,000 bushels; wheat (minus quantities committed to the Bill Emerson Humanitarian Trust): 2,300,000 bushels; non-fat dry milk (minus quantities committed to Dairy/Donations): 3,700,000 pounds; cheese (minus quantities committed to Dairy/Donations): 1,100,000 pounds.
The CCC-owned inventories are zero for the following commodities: butter, soybeans, sorghum, rice, honey, peanuts, canola, flax seed, sunflower oil and seed, dry peas and lentils.
Do the math. Total these figures and divide them by current U.S. population (293,027,571 as of 7-1-04) and you discover our per person food reserves can be measured in ounces. Imagine, less than one pound of commodity per citizen. The cupboard is bare. In fact, the entire nation?s non-committed CCC grain stocks could be stored in Pawnee County, KS, elevators utilizing less than 50% of storage capacity!
One has to see that the "Freedom to Farm" law, with the objective to get the government out of supply management and food reserves, was a resounding ?success.? Now the likes of Cargill, Tyson and ADM own and manage the world?s food supply/security. What a sobering thought.
There is no surplus of food in our world, or for that matter, this country. Stocks of food and fiber must be viewed as an asset, not a liability. The fact of the matter is the United States now operates with a trade deficit with regard to agriculture. So much for the old slogan, "we feed the world." The world now feeds us.
We are steadily replacing a policy of agriculture trade and food reserves with the export of guns, bombs and weapons of war. I believe food is a more powerful tool in promoting peace than a bullet. Humanitarian food programs, such as P.L. 480 (Food For Peace) have been minimized. The success of these programs is well documented, but somewhere along the line we have lost sight of their value. We should insist Congress and the Administration get back on track.
We must utilize our great resources in a humane fashion, to guarantee an ample, safe and stable food supply, both here and abroad. Respect for the land and those who cultivate and harvest the bounty must be recognized and elevated. Hunger, poverty and war will continue to blossom if we stay on our current course. Why assume all the risks and suffering when there is so much more to be gained from a judicious food and fiber policy?
Tom Giessel
President, Pawnee County Farmers Union
Larned, Kansas
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